PALMOILMAGAZINE, KUALA LUMPUR – Malaysia’s palm oil industry continues to demonstrate resilience amid global uncertainties, largely driven by sustained demand from key markets like China and India. However, analysts warn that the sector still faces significant risks, ranging from climate change to tightening international trade regulations.
Economic analyst Dr. Zulkufli Zakaria identified climate change as one of the most pressing threats. Unpredictable weather patterns—such as floods and droughts—continue to disrupt palm oil production.
“Despite various mitigation initiatives, the impact of climate change remains. However, the industry’s gradual shift toward climate-resilient practices is a promising sign,” Zulkufli said, as quoted by Palmoilmagazine.com from Business Times on Friday, April 11, 2025.
He also highlighted the European Union’s Deforestation Regulation (EUDR), which requires importers to ensure their products are free from deforestation-linked practices. This policy could pose a major challenge—particularly for smallholders—and complicate exports to Europe.
“Malaysia must respond with strategic measures to maintain its place in the global supply chain,” he added.
Also Read: Minister Sri Mulyani Responds to Global Pressure with CPO Export Levy Cut
Shifting Consumer Trends and Global Competition
Dr. Zulkufli also pointed to shifting consumer preferences, with growing health awareness potentially reducing demand for palm oil.
“To stay competitive, Malaysia must adapt to changing consumer trends,” he said.
Meanwhile, China remains a vital market for Malaysian palm oil. Although overall import volumes have declined, palm oil remains essential in several industries—especially food manufacturing.
“The instant noodle industry, for instance, relies heavily on palm oil—about 75% of its production uses it. With annual consumption at 40 billion packets, the volume of palm oil used is substantial,” he explained.
Also Read: Malaysia Allocates RM10 Million to Improve Palm Oil Perception in the EU
However, he cautioned that global price fluctuations could impact China’s import decisions.
“If palm oil becomes too expensive, China may shift to soybean oil or other alternatives,” he noted.
A plantation analyst added that China’s post-pandemic economic recovery is fueling demand for processed goods and cosmetics—both of which rely heavily on palm oil.
“With rising incomes and increased social activity, beauty product consumption is growing, which supports palm oil demand,” the analyst said.
Trade tensions between China and countries like Canada have also led to reduced soybean imports, prompting a pivot toward palm oil. In addition, China’s expanding biodiesel sector—boosted by renewable energy policies—is further increasing palm oil usage.
“Other factors, such as currency exchange rates and global pricing, also play a role. If palm oil remains more affordable than its alternatives, China is likely to boost imports,” the analyst added.
Despite the complex landscape, analysts agree that while Malaysia’s palm oil industry remains relatively strong, adaptive and innovative strategies will be essential to maintain competitiveness and ensure long-term sustainability. (P2)
